Two Hundred And Twenty Billion New Reasons To Be A Plug-in Vehicle Skeptic

John Petersen

On April 8th the Electrification
Coalition, a recently formed industrial lobby comprised of
top-level executives from Cisco Systems (CSCO),
Aerovironment (AVAV),
NRG Energy (NRG),
Rockwood Holdings (ROC),
Nissan Motors (NSANY.PK),
FedEx (FDX), A123
Systems (AONE)
and a gaggle of private companies released a slick but wholly
unenlightening white paper titled, "Economic
Impact of the Electrification Roadmap."
I haven't seen so many finely sculpted curves and unspoken assumptions
since the tax shelter forecasts of the early-80s. The only clear
message is that electric drive will be little more than a footnote in
automotive history unless the powers that be agree to provide $121.1
billion in direct subsidies and incur another $100 billion in
unspecified budget deficits over the next decade. Then, if everything
goes according to plan and nobody develops a better personal
transportation alternative, we can start thinking in terms of cost
recovery and potential benefit to society.

I'd love to be able to provide an in-depth analysis of the assumptions,
but they're conspicuously absent. For me, that fact alone makes the
analysis about as worthwhile as a call to the psychic hotline. While I
hate to be a stick in the mud about history, I think it's always
worthwhile to remember other transportation technology schemes
conceived in the halls of government and sold to investment markets as
the next big thing, including:

25 years ago

Methanol

15 years ago

Electric Vehicles

10 years ago

HEVs and Electric Vehicles

5 years ago

Hydrogen Fuel Cells

3 years ago

Ethanol and Biofuels

Today

Grid Enabled Vehicles

2012

???

Given the sweeping technological change I've witnessed over the last
thirty years, I have to chuckle when anybody is naïve enough to
suggest that any technology can ascend to dominance and hold that
position for the next thirty years. On balance, I see the forecast
decade of sunk-costs as realistically achievable but view the forecast
cost recovery and long-term benefit decades as highly suspect.

To their credit the Electrification Coalition has always been upfront
about the enormous challenges that electrification of personal
transportation entails, including:

The current high cost of batteries;

The current lack of reliable access to refueling infrastructure
for GEVs;

Regulatory and coordination problems that will complicate
interface with the electric power sector; and

Consumer acceptance issues.

To overcome these seemingly insurmountable problems the coalition
members propose several policy initiatives that will use your tax money
to underwrite their business goals and pay for somebody else's
consumption. The principal policy initiatives are summarized below,
along with my personal observations.

Giving utilities credits for
using uneconomic automotive batteries in uneconomic grid applications
is like buying eggs for a dime, selling them for a nickel and trying to
make up the difference on volume.

Last time I checked, $10 billion
in loan guarantee costs can add up to $50 to $100 billion in government
liabilities if the borrowers default.

Policy
Three - $9.70 billion

Establish a guaranteed residual
value for used large-format automotive batteries.

Doesn't anybody believe the
happy talk about the future resale value of used EV batteries?

Policy
Four - $74.10 billion

Modify electric vehicle tax
credits to make them variable such that the upfront cost of a new PHEV
or EV is equal to a comparably sized conventional vehicle.

I thought consumers were lining
up around the block to pay a premium price for less utility,
performance and flexibility.

Policy
Five - $12.60 billion

Establish business tax credits
equal to 75 percent of the cost to construct public charging
infrastructure.

Risk money is hard to find in a
chicken or egg situation.

Policy
Six - $0.80 billion

Extend consumer tax credits for
home charging equipment.

Home charging stations are part
of the car cost.

Policy
Seven - $0.18 billion

Establish utility tax credits
for up to 50 percent of the costs of the necessary IT upgrades to sell
power to electric vehicle consumers.

Why is pocket change IT spending
even an issue?

Black
Hole Policy Costs

The unexplained $100 billion gap
between the $121.1 billion in line item costs and the $220 billion
cumulative increase in the Federal deficit by 2019.

What's a $100 billion between
friends?

When I consider the electrification coalition policy initiatives, it's
easy to see why the members are eager supporters of a proposal to
convert huge piles of taxpayer money into operating revenue. I have a
harder time, however, with the tacit admission that electric drive has
no real future without government intervention to force the issue. The
wheels really come off the bus when I consider the duplicity of
suggesting that we can expect quantum leaps in battery powered electric
drive technology, but must ignore the likelihood that some other
nascent technology will gain enough ground over the next decade to give
battery powered personal transportation a run for the money.

At its core, cleantech is an ethical system based on the responsible
application of technology to optimize the use of natural resources,
moderate global warming, secure energy independence, offset rising
energy costs and increase the well-being of the six billion people that
live on this planet. There has never been an industrial revolution led
by a technology that promised to deliver less economic benefit at a
higher economic cost. Shifting the burden from consumers to taxpayers
is like re-arranging the deck chairs on the Titanic, a hollow
subterfuge that does nothing to eliminate the burden of unconscionable
waste masquerading as conservation.

Were I made of sterner stuff I'd short them all. Fortunately,
experience has taught me that the market can remain irrational longer
than I can remain solvent. So I'll just watch the predictable train
wreck from the sidelines.

Comments

"The only clear message is that electric drive will be little more than a footnote in automotive history unless the powers that be agree to provide $121.1 billion in direct subsidies and incur another $100 billion in unspecified budget deficits over the next decade." Thats very interesting.

I completely agree that "electric drive has no real future without government intervention to force the issue."